By Tae Kim

Applied Materials' disappointing outlook is bad news for chip equipment makers, as more of the industry's buying power consolidates toward Taiwan Semiconductor Manufacturing.

Late Thursday, Applied Materials forecast a range of revenue for the October quarter with a midpoint of $6.7 billion, below the consensus view of $7.33 billion.

"We are currently operating in a dynamic macroeconomic and policy environment, which is creating increased uncertainty and lower visibility in the near term, including for our China business," Applied Materials CEO Gary Dickerson said in a news release.

Applied Materials stock dropped 11% to $166.99 in early trading Friday. The company's key customers include Intel and Taiwan Semiconductor Manufacturing, or TSMC.

In an interview with Barron's after the results, Dickerson said some customers in China were digesting prior purchases. He added that the company saw "lumpiness" in demand from advanced logic chip equipment customers where there has been further customer "market concentration."

Analysts say the executive is likely signaling the growing buying power of TSMC as Intel has begun to pare back the size of its future capital expenditure investments.

Intel has hoped to win more advanced chip manufacturing clients away from TSMC but has thus far failed to win big customers for its latest manufacturing process 18A.

Last month, the company dialed back investment plans in its foundry business strategy. Intel CEO Lip-Bu Tan stated in an internal memo: "There are no more blank checks. Every investment must make economic sense."

Intel's move is bad news for advanced chip equipment makers -- including Applied Materials, KLA, and Lam Research. That's because any decrease in factory spending plans will lower competitive pressure on TSMC to keep investing in new equipment, while also giving the Taiwan-based company the ability to win better deals from vendors.

Shares of Applied Materials' chipmaking equipment peers KLA and Lam Research were both falling more than 6% on Friday.

Investors seem to be drawing the same conclusion.

Write to Tae Kim at tae.kim@barrons.com

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August 15, 2025 11:52 ET (15:52 GMT)

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